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A big quarter for Google’s PLAs, including Amazon’s entry into the market

January 24, 2017 12:18 PM

Google’s efforts to drive marketers and consumers to its Product Listing Ads—the ads that present product images, prices and business names to users searching on Google—appear to be working, according to search marketing firm Merkle RKG’s “Merkle Digital Marketing Report Q4 2016.”

Marketers boosted their PLA spending 30% during the fourth quarter, while text ad spending rose just 12%. In each quarter of 2016 PLA spending rose at least 30% while text ad spending never grew more than 15%. That increased spending helped drive a 43% rise in PLA clicks and a 9% decline in the cost per PLA click. For the sake of comparison, Google text ad clicks rose 8% and the cost per click rose 4%.

PLAs accounted for about 48% of retailers’ total Google search ad clicks during the quarter, according to the report. However, they accounted for 74% of non-brand PLAs, which aren't tied to a specific brand name.

Amid PLA growth, there was another major development; Amazon.com Inc., which had been conspicuously absent since Google launched a paid Google Shopping model in 2012, began testing the format in the final two weeks of 2016 when products shipping and sold by Amazon began appearing in Google Shopping results.

To examine how Amazon may change the PLA market, Merkle examined Google’s Auction Insights reports—which present Google advertisers with data on their competitors’ performance in the auctions they’re competing in—for more than 50 large Google Shopping advertisers. The search marketing firm found that Amazon only appeared in four of the reports in late December, but by mid-January, Amazon appeared in more than 20 reports.

Amazon’s initial foray into PLAs centered on home goods. Looking at its bidding patterns, Merkle suggests that Amazon is bidding significantly more aggressively for PLA traffic on mobile devices than desktop as its impression share of phone PLAs is about twice as high as it is for desktop PLAs.

Even so, it isn’t yet clear whether Amazon will expand its program to other categories or how it plans to proceed, the report suggests. “The key questions remain: Will Amazon finally make a bigger move, and what will it mean for retailers and for the completion competition? between Google and Amazon to be consumers’ first destination for online shopping?” Merkle writes. Amazon is No. 1 in the Internet Retailer 2016 Top 500 Guide.

Regardless of Amazon’s efforts, marketers continue to pour money into paid search. Google search ad spending rose 19% in the fourth quarter, while clicks rose 20% and the average cost per click fell less than 1%. Looking specifically at the retail and consumer goods vertical, Google search ad spending rose 19%, as did clicks. The cost per click rose about 1%.

Moreover, 35% of retailers’ Google search ad spend was dedicated to smartphones, which accounted for 53% of ad clicks. Tablets accounted for 10% of retailers’ ad spending and clicks, with desktop and laptops accounting for 55% of spending and 37% of clicks.

Looking more broadly across multiple industries, smartphones accounted for 51% of Google search ad clicks during the quarter; a year earlier smartphones accounted for just 37% of Google search ad clicks. That’s the first time more than half of Google search ad clicks were produced by phones.

The report also shows that Google dominates the smartphone search ad market, accounting for 96% of smartphone paid search clicks in the fourth quarter, with Bing accounting for 3% and Yahoo Gemini 1%. That compares to desktop where Google accounted for 81% of paid search clicks, with Bing at 16% and Yahoo Gemini 2%. Overall, Google accounted for 89% of paid search clicks, Bing 9% and Yahoo Gemini 2%. That continues a longstanding trend. For instance, in 2015’s fourth quarter Google accounted for 85% of paid search clicks. Google’s share of paid search ad spending also rose to 88% from 84% a year earlier.

Interestingly, social media sites accounted for 3% of all site visits in the fourth quarter and 4% of mobile site visits. Looking specifically at social media advertising, Merkle reports that Facebook ad spending rose 65% during the quarter. Facebook’s cost per click fell 17% during the quarter, marking the fifth straight quarter of declines in the cost of Facebook ad clicks. Meanwhile the cost per thousand impressions rose 12%.